1 Cash-Producing Stock to Keep an Eye On and 2 Facing Headwinds

Barchart·05/05/2026 00:22:18

A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.

Two Stocks to Sell:

Hormel Foods (HRL)

Trailing 12-Month Free Cash Flow Margin: 4.8%

Best known for its SPAM brand, Hormel (NYSE:HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.

Why Are We Out on HRL?

1. Falling unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
2. Gross margin of 16.2% is below its competitors, leaving less money to invest in areas like marketing and production facilities
3. Performance over the past three years shows each sale was less profitable, as its earnings per share fell by 8.8% annually

Hormel Foods is trading at $20.69 per share, or 14.2x forward P/E. Check out our free in-depth research report to learn more about why HRL doesn’t pass our bar.

Forestar Group (FOR)

Trailing 12-Month Free Cash Flow Margin: 15.5%

As a majority-owned subsidiary of homebuilding giant D.R. Horton, Forestar Group (NYSE:FOR) develops and sells finished residential lots to homebuilders, focusing primarily on land acquisition and development for single-family homes.

Why Do We Avoid FOR?

1. Annual revenue growth of 8.8% over the last five years was below our standards for the consumer discretionary sector
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Forestar Group’s stock price of $26.23 implies a valuation ratio of 9.7x forward P/E. If you’re considering FOR for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Tenet Healthcare (THC)

Trailing 12-Month Free Cash Flow Margin: 15.6%

With a network spanning nine states and serving primarily urban and suburban communities, Tenet Healthcare (NYSE:THC) operates a nationwide network of hospitals, ambulatory surgery centers, and outpatient facilities providing acute care and specialty healthcare services.

Why Could THC Be a Winner?

1. Share buybacks catapulted its annual earnings per share growth to 16.8%, which outperformed its revenue gains over the last five years
2. Free cash flow margin increased by 12.7 percentage points over the last five years, giving the company more capital to invest or return to shareholders
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its rising returns show it’s making even more lucrative bets

At $183.67 per share, Tenet Healthcare trades at 10.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

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